The managerialization of banking: from blueprint to reality

Abstract

This paper shows how banks in the USA and Western Europe became more managerial during the late 1960s and 1970s, due to the adoption of a multidivisional organizational structure, originally pioneered by industrial enterprises in the 1920s. This meant the introduction of a more elaborate hierarchy with more autonomy as well as accountability for all levels, including the branches, which were supposed to generate profits through more ‘aggressive’ marketing and selling, while the center exercised control through explicit management tools, including budgeting and planning. As this paper also shows, these changes were actively promoted by consultancies, and in particular McKinsey, which had developed a blueprint of a ‘modern’ banking organization that it subsequently implemented in a large number of banks – a process that this paper illustrates through an in-depth case study of the Dutch Amsterdam-Rotterdam (AMRO) bank. More generally, insights from this paper query an established timeline that links the more aggressive, even reckless behavior of banks with deregulation since the 1980s and also casts some doubt on the notion – often sustained by consultants – that management ideas and practices can easily be transferred from one sector to another.

Keywords::

• banking
• organizational structure
• management
• consultants
• financial crisis

Disclosure Statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by The Netherlands Organisation for Scientific Research (NWO) [grant number 275-53-010 (Veni granted to Gerarda Westerhuis)]

Notes on contributors

Matthias Kipping

Matthias Kipping is Professor of Policy and Chair in Business History at the Schulich School of Business, York University in Toronto, Canada. His main research concerns the history and role of the consultancy business – a topic on which he has published widely. He is currently examining how consultants contributed to organizational and ideological changes in the financial services industry since WWII.

Gerarda Westerhuis

Gerarda Westerhuis works as a researcher at the Department of History and Art History (Utrecht University) and as a lecturer at the Department of Finance, Rotterdam School of Management (Erasmus University). Recently, she started her new research project entitled “Unraveling the origins of a banking crisis: changing perceptions of risk and managerial beliefs in Dutch banking, 1957–2007”. Her main research interests are banking, financing, corporate governance, networks and financial elites.